Once the wedding date has been set and the invitations mailed, it is now time for you and your future spouse to talk seriously about your money as you embark on the next chapter of your lives together. Often, revelations about debt, income and bad spending habits can wreak havoc on a marriage, even for couples that have dated for years prior to tying the knot (case in point: Nick Lachey and Jessica Simpson). So it is important for couple to come to an agreement about spending habits, budgets, and everything related to their finances as soon as you put a ring on it. After all, like it or not, your finances will be tied together for the rest of your lives once your say “I Do”.
Bear in mind that the whole idea of talking about your finances is to gain a better understanding of not only where you are today financially as a couple, but also where you would like to be in the next 20, 30 years. So how do couples get started? Unromantic as it sounds, we suggest couples start by itemizing a list of their own assets like checking and savings accounts, 401(k)s, stock or bond investments, real estate, jewelry and other valuable collectibles in their portfolios. Followed by a list of each person’s own liabilities, including credit card debt, car loans, student loans, gambling debt, etc. That kind of disclosure will not only help determine the wedding and honeymoon budget, but also prevent any post-wedding whammies. Additionally, having a clear understanding of your asset and debt level can help spark further conversation about other important issues. Perhaps one person has significant debt that should be paid down first before the marriage? Perhaps one person is coming into the marriage with a lot more wealth than the other? What if one spouse has children from a prior marriage? All these are important factors in helping couples decide how, or whether they should mix their finances after the marriage. So it is important to sit down with a financial advisor to go over their options and find an arrangement that best fit their situation.
Once the couple has an overview of their assets and liabilities, the next step is to set financial priorities and come up with a reasonable budget plan. Agreeing to a budget plan can be a challenge to most couples, so it is important to be respectful and keep an open mind to the needs and wants of the other person. We recommend that the couple mutually come up with a list of top 5 financial priorities, then list them in the order by which you would like to tackle first. Financial priorities can include things like purchasing your first home, paying for honeymoon, paying down student loan, paying off credit card debt, or saving for retirement. The most important thing is making sure each priority has a definite dollar amount, and a time table so that you can measure your progress.
[author image=”http://wedding-bros.com/wp-content/uploads/2013/08/andrewchou2.jpg” ]Andrew B. Chou, CFP® Founder / Managing Partner of Nexgen Wealth Management. Andrew contributes regularly to Financial Planning Association’s “All Things Financial Planning” blogs, where he shares his expertise on advanced financial planning techniques and sophisticated investment strategies. He is also frequently quoted or published in publications such as Investment News, Pasadena Magazine, Los Angeles Business Journal, and others. [/author]